Gender-diverse boards are “tougher monitors” not because of gender differences per se, but rather because they are more geographically remote from headquarters and hence more reliant on hard information such as stock prices

See Gender and Geography in the Boardroom: What Really Matters for Board Decisions? Here are the authors and the abstract.

Zinat S. Alam

University of Oklahoma- Division of Finance

Mark A. Chen

Georgia State University - Robinson College of Business

Conrad S. Ciccotello

Daniels College of Business, University of Denver

Harley E. Ryan

Georgia State University - Department of Finance
Date Written: December 18, 2018

Abstract

Recent literature has shown that gender diversity in the boardroom seems to influence key monitoring decisions of boards. In this paper, we examine whether the observed relation between gender diversity and board decisions is due to a confounding factor, namely, directors’ geographic distance from headquarters. Using data on residential addresses for over 4,000 directors of S&P 1500 firms, we document that female directors cluster in large metropolitan areas and tend to live much farther away from headquarters compared to their male counterparts. We also reexamine prior findings in the literature on how boardroom gender diversity affects key board decisions. We use data on direct airline flights between U.S. locations to carry out an instrumental variables approach that exploits plausibly exogenous variation in both gender diversity and geographic distance. The results show that the effects of boardroom gender diversity on CEO compensation and CEO dismissal decisions found in the prior literature largely disappear when we account for geographic distance. Overall, our results support the view that gender-diverse boards are “tougher monitors” not because of gender differences per se, but rather because they are more geographically remote from headquarters and hence more reliant on hard information such as stock prices. The findings thus suggest that board gender policies, such as quotas, could have unintended consequences for some firms.